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Media rebates remain high in many markets

Significant proportion returned to advertisers as free spaceSome advertisers reduce agency fees to compensateAdvertisers don't believe all rebates are returned

The World Federation of Advertisers (WFA) has released the results of its latest survey into the level and distribution of media rebates in Europe, Asia Pacific and Latin America.

The first such survey since 2009 reveals that media rebates – payments to media agencies in return for spending client money with key media owners – remain an essential part of the media trading landscape in many key markets and that marketers need to continue to push for transparency in this area. The WFA, which represents many of the world's biggest advertisers, does not object to the existence of rebates but expects that advertisers will benefit from any volume/frequency discount earned directly and from any share of such discounts earned by their agencies. Our survey found that many marketers believe that the perceived level of rebate is higher than what they believe is being returned in a number of markets.

Although the survey is not definitive with central marketers from 32 multinational companies taking part, it represents the best look at the geography of media rebates. Respondents were asked in November 2011 to rank their perception of the size of media rebates on a scale of 0-3 (where 3 was very high) for 36 key markets. Respondents were responsible for more than $35bn in gross media spend.

Respondents identified Greece and Turkey as the markets with the highest level of rebates in Europe, closely followed by Russia, Ukraine and Spain. There was little change in the level of perceived rebates across all markets since the previous survey. Ranked by media, online was seen as having the highest levels of rebates followed by TV, press and outdoor.

Of the rebates which were given back, 28% of rebates were returned as free spots and space while cash rebates tend to be paid annually according to 82% of respondents. Fifteen per cent of respondents also used rebates to reduce direct payments for agency remuneration.

In Asia Pacific, the market singled out as having the highest level of rebates was China followed by Indonesia, the Philippines and India. In this region advertisers also identified a major gap between the rebates they believed were being returned to agencies and the payments they received.

Rebate levels in China were ranked at 2.8 out of three but returns were only ranked at 1.7 on the same scale. Similar gaps were seen in Indonesia, (rebates ranked at 2.3 and returns at 1.3) and Philippines (2.1 and 1.6). Marketers in APAC identified TV as the medium paying the biggest rebates followed by outdoor, online and press.

Thirteen per cent of rebates were returned as free space while most cash returns were annual, although 16% were received monthly. Fourteen per cent of respondents also used rebates to reduce direct payments for agency remunerations.

Respondents identified Colombia, Mexico and Brazil as rebate hot spots in Latin America. Online was identified as the medium paying the highest rebates, followed by TV. There was a significant gap between the perceived level of rebates paid and returned in Mexico with rebates paid ranked at 2.1 out of three and rebates returned at just 1.6.

Twelve per cent of rebates were returned as free space with cash returned annually although 16% received monthly payments. Twenty-two of respondents also used rebates to reduce direct payments for agency remunerations.

Said Stephan Loerke, WFA Managing Director; “One of the WFA's key priorities is transparency and this survey is intended to inform our members about media custom and practice that is often shrouded in secrecy. Our members expect agency partners to be open and honest about these payments and return them to the advertisers whose investment generates them.”

The WFA will be highlighting the issue of transparency and rebates at both the Festival of Media in Switzerland on April 17 and as part of its Asia-Pacific Media and Marketing Network meeting in Singapore on April 26.